What's moving markets: correction or crisis? It depends where you sit.
“…rapidly declining markets, whilst always sobering, can also represent a signal to buy rather than sell and to remain calm while others panic.”- Matthew Sherwood, Head of Investment Market Research, Perpetual
Below summary of article written by Anthony O'Brien
Most commentators have blamed weakening global growth prospects and rising deflationary risks for the recent market correction.
Yet rates are at zero in 10 of the world's largest 13 economies. So why is growth so low?
The answer is very simple - there is too much debt in the world. Other than isolated cases (namely US banks and US households) no group has truly unwound its debt excesses since 2009 - most countries have wasted the past five years trying to spend their way out of debt. It is not surprising that the economy with the highest growth prospects in 2015 (the US) is the one which has done the most balance sheet repair.
Therefore the key question for investors is whether the recent market decline was an overdue correction, or something more fundamental that requires a change in investment strategy?
To read this article in full, click here
Frequently Asked Questions about this Article…
A market correction is typically a short-term decline in stock prices, often seen as a natural part of market cycles. A market crisis, on the other hand, indicates more severe and prolonged economic issues that may require a change in investment strategy.
Global growth prospects are weakening mainly due to excessive debt levels worldwide. Despite low interest rates, many countries have not effectively reduced their debt since 2009, which hampers economic growth.
Investors can view rapidly declining markets as a potential buying opportunity. It's important to remain calm and avoid panic selling, as these downturns can signal a chance to invest at lower prices.
The US economy is showing higher growth prospects because it has made significant progress in repairing its balance sheets, particularly in the banking and household sectors, unlike many other countries.
Debt plays a significant role in the current economic climate as excessive debt levels have hindered global growth. Many countries have not effectively managed their debt, impacting their economic recovery.
Investors should assess whether recent market declines are a temporary correction or indicative of deeper economic issues. This assessment will help determine if a change in investment strategy is necessary.
US banks and households have made notable progress in unwinding their debt excesses since 2009, contributing to the country's stronger economic growth prospects compared to other nations.
During market volatility, the key question for investors is whether the market decline is a simple correction or a sign of more fundamental economic issues that require a strategic shift in investments.
Call 1300 880 160
Start a chat
Schedule a call
